Corn continues to make fresh new contract lows with the DEC17 contract falling to $3.36^2 yesterday on weaker than expected U.S. exports, more talk of increased U.S. acres in 2018 and to this point mild South American weather.
Looking ahead the bulls are talking about possible complications in portions of both Argentina and Brazil. The thought is Argentine could become too dry in several key areas, while heavy rains in Brazil could create complications for second-crop corn. The problem is with domestic and global corn supply overly burdensome the trade is not very interested in looking too far out on the horizon.
With this mindset, nearby price rallies seem somewhat limited. Perhaps we could see a +10 to +15 cents pop to the upside should the funds get a bit spooked during the next 30 to 60-days, but an extended rally with fundamental buying and momentum beyond that seems overly optimistic.
In other words, I'm still thinking we are dancing to lower-highs and lower-lows. If you're a producer and have to price bushels during this time period, don't get overly greedy. If the bears take a break to catch their breath and we back-and-fill to the upside, you might want to think about pulling the trigger.
If you are in a better cash position and can afford to play a longer-term game, then weather could start to gain some additional risk premium as we move beyond the first couple of weeks in 2018. I should point out, there's starting to be more basis appreciation in many areas, so we need to make certain we are checking with our local buyers. Options on the board are extremely cheap and there might be some opportunities in areas to move cash bushels. It's tough right now.
Volatility is so cheap I don't want to sell premium, but at the same time I don't want to let the carry slip away and the deferred months trade down to spot. A lot of folks scratching their heads right now... One thing I don't want to do is make a move just because I'm bored and feel like I should be doing something.
As I've learned often in life, fear and boredom can often be a combination or recipe for disaster. This certainly isn't the time to gun it in hopes of blasting our way out of a rut. We may be tempted to shake things up by trying to force sudden and dramatic change. But I'm most worried we end up just spinning our wheels and doing more damage than good.